The Role of Fintech and the Shadow Economy in Advancing Sustainable Development Across G7 Countries: Evidence From MMQR Analysis

Achieving sustainable development requires balancing economic growth with environmental conservation, but the relationship between informal economic activities and emerging financial technologies in boosting green growth (GG) is not well understood. The current study identifies this gap by considering the impact of the shadow economy (SE) and financial technology named fintech (FT) on GG in G‐7 countries from 1996 to 2020. In contrast to previous studies where these factors are considered separately, the research presents a comprehensive approach that simultaneously investigates the effects of SE and FT across the conditional distribution of GG, a more detailed view of the heterogeneous effects of these two factors. The study uses method of moments quantile regression (MMQR) with fully modified ordinary least squares (FMOLS), dynamic ordinary least squares (DOLS), and Canonical Cointegration Regression (CCR) to confirm robustness. The results indicate that SE has a statistically significant negative impact on both FT and GG as a structural hindrance to sustainable development. Conversely, FT has a positive and significant contribution to GG, which underscores its possible role in promoting environmental sustainability. These findings have robust policy implications: reducing SE and promoting FT ecosystems are two complementary measures needed to promote GG in developed economies.